Positive Outlook Investments in Indonesia’s Food & Beverage Industry

Investment in Indonesia’s processed food and beverage industry is expected to grow at least ten percent to IDR 55 trillion (USD $4.6 billion) in 2015 from an estimated investment realization of IDR 50 trillion in 2014. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (GAPMMI), said that investments in this sector have been solid due to rising consumption of food and beverages in Southeast Asia’s largest economy. Particularly foreign investments have been strong in 2014 and are expected to continue next year.

Foreign direct investment (FDI) in the food and beverage industry of Indonesia totalled USD $2.5 billion in the first nine months of 2014. Foreign companies are attracted by the country’s large population (numbering about 250 million people), and growing per capita GDP (which expanded from USD $1,643 in 2006 to USD $3,468 in 2013 according to data from the World Bank). Due to the rapidly expanding middle class, Indonesians consume more - as well as higher quality - products including food items and beverages. The Boston Consulting Group expects that by 2020 about 141 million Indonesians belong to the middle class, almost double from the figure in 2013 (74 million). These foreign companies are primarily focused on the island of Java because infrastructure is most developed on this island (implying relatively low logistics costs as compared to other Indonesian islands) and because most Indonesians live on Java.

Based on data from the Indonesia Investment Coordinating Board (BKPM) a total of IDR 40.7 trillion has been invested in Indonesia’s food and beverage industry in the first nine months of 2014. Lukman is positive that there will be about IDR 10 trillion (USD $833 million) worth of investments in the last quarter of 2014 as several foreign companies are currently expanding to Indonesia (for example several milk factories are currently being built).

Investments in Indonesia's Food & Beverage Industry:

2010

2011

2012

2013

2014

2015

Investmentin IDR trillion

25.6

17.8

26.1

35.0

50.0

43.0

¹ projectionSource: GAPMMI

Next year, investment in Indonesia’s food and beverage industry is expected to grow ten percent, particularly supported by FDIs. Apart from the lucrative prospects of the industry, Lukman added that the current weak rupiah rate also forms a motive to invest in Indonesia. In 2013, the Indonesian rupiah exchange rate depreciated over 25 percent against the US dollar. Particularly companies from Japan and South Korea have shown their interest to invest in the industry.

| Source: Bank Indonesia

Based on a projection from GAPMMI, turnover in Indonesia’s food and beverage industry will reach about IDR 1,000 trillion (USD $83.3 billion) in 2014, up from IDR 940 trillion last year. Growth in the second half of 2014 is expected to have slowed slightly due to the political uncertainties after the presidential election in July 2014. Moreover, declining commodity prices cause declining purchasing power in those Indonesian regions where commodities are produced.